Higher capital ratios trade growth for stability – Philadelphia Fed paper

graph-arrow-upwards-growth

Stricter capital requirements increase lending costs and reduce economic growth, but make a full-blown financial crisis less likely, says research published by the Federal Reserve Bank of Philadelphia.

In Are Higher Capital Requirements Worth It?, Pablo D’Erasmo says that for every 1% increase in capital minimums, lending rates increase between five and 15 basis points.

“It is reasonable to expect that increases in borrowing costs of this magnitude may curtail lending enough to create a

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: http://subscriptions.centralbanking.com/subscribe

You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Central Banking? View our subscription options

Register for Central Banking

All fields are mandatory unless otherwise highlighted

This address will be used to create your account

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account

.